Innovation holds enormous potential for companies that strive to sustain and grow their market shares as well as improve their profit margins. But how good are we at working with innovation in the Facility Management industry?
Innovation is one of the top challenges for the Facility Management industry. Innovation is not only important in terms of increased competition among service providers, but also in terms of an increasing request for innovative solutions from clients.
Back in the days, cost savings were the primary drivers behind business decisions to outsource. However, as this trend matured customers begun to put more emphasis on access to new skills sets, better speed-to-market for new and better products and services and most importantly greater innovation. Even though some deals got struck on a cost-neural basis or at even a higher initial cost – the value-benefits from innovation were hard to overlook.
Understanding innovation in the context of Facility and Service Management
Innovation in Facility Management has never been as straightforward as in product-centered companies. This is not only in practice but also in theory that most were dominated by product innovation rather than by service innovation. So how should the practice of service innovation be understood?
Innovation in Facility and Service Management must be a planned approach, which an organization adopts when creating new ideas. This means that if an improvement comes accidentally or a series of improvements happen randomly then this is not service innovation.
Just as innovation should not happen randomly the same applies to the benefits of innovation, which include economic satisfaction, personal growth and productivity. All these metrics and factors should be anticipated.
Also, innovation must be coordinated across the business. This can be done via Best Practice programmes where Center of Excellence drives the collection, definition, documentation and deployment of innovative practices in a structured way.
In service companies especially, the burden of deploying innovative practices to service staff is cumbersome, due to the decentralized nature of the business. Hence, innovation must be practiced bottom-up or top-down.
The prevalence of innovation in the Facility Management industry
Even though it is unquestionable that innovation takes place in the Facility Management industry, the question is how much and how organized it is.
Statistics show that the costs allocated to innovation in the service industry are more than three times lower than in the production industry. There are many possible reasons why this may be the case. It could be because the sector is more mature compared to the production industry and therefore the need for innovation is lower. This is however unlikely as the service sector has been growing more rapidly over the last 25 years compared to the production industry. Another perspective on the lower innovation costs within the facility management industry could be that the decentralized innovation setup makes it difficult to measure the total resource allocation of innovation. More likely, this is the reason.
Other barriers for innovation in service organizations including Facility Management service providers could be the fact that they are often producing intangible products which makes them more difficult to perceive and therefore more difficult to change and innovate.
That, combined with simultaneity (the fact that it is delivered and used at the same time) and heterogeneity (the two service deliveries are never quite the same) may explain why innovation is less widespread in service compared with products.
While there is very little industry data which indicates how much is spent on innovation in Facility Management, there is however a significant amount of research which supports two general statements:
- The larger the service providers are the more likely it is that there will be innovation. This fits well with a survey which have documented that the more multinational a service company is the more innovative it is. The reason behind this is that larger service providers are more likely to have robust innovation processes in place as well as many sites on which idea generation can take place.
- Outsourced Facility Management innovates more than in-house Facility Management teams. The barriers for innovation for in-house Facility Management teams are often significant and primarily fall into three categories: Cultural inertia, lack of size and processes, and lack of outside inspiration. A survey showed that 92% of Facility Managers believed that innovation approaches differ between outsourced an in-house facility management teams.
Would you like to learn more about the widespread of innovation in the Facility Management industry? Then please download our White Paper: Service Innovation in the Facility Management industry
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